Corporate Tax
In our earlier articles, we covered how Japan's consumption tax works, when a new company is exempt, and how the Qualified Invoice System can push an exempt business to register anyway. Once you've made that decision, or once growth makes you taxable regardless, a practical question follows: what does compliance actually look like afterward? The answer is that filing consumption tax isn't always a once-a-year event.
When people quote a single rate for Japan's corporate tax, they're usually referring to the combined effect of several taxes charged together on the same profit. You file and pay these through a small handful of returns rather than one, and each has its own base and rate:
| Tax | What it's charged on |
|---|---|
| National corporate tax | Taxable income — 15% on the first ¥8 million for a small company, 23.2% above that |
| Local corporate tax | A surtax calculated on your national corporate tax |
| Corporate inhabitant tax | An income-based portion, plus a fixed per-capita portion due every year regardless of profit or loss (commonly around ¥70,000 for the smallest companies) |
| Enterprise tax (plus a related special enterprise tax) | Taxable income, at rates that vary by prefecture |
| Special defense corporate tax (new, for fiscal years starting on or after April 1, 2026) | A 4% surtax on your national corporate tax liability above an annual ¥5 million deduction |
Most small or newly established companies with modest profits will owe little or nothing under the new special defense corporate tax once its deduction is applied, but it's a genuinely new line item, and older explanations of Japan's corporate tax system won't mention it.
The 15% reduced rate on national corporate tax applies to a company with capital of ¥100 million or less, on its first ¥8 million of taxable income each year. It's a temporary measure that has been repeatedly extended, and is currently set to apply through fiscal years ending by March 2027, so it's worth confirming it's still in effect at the time you're calculating.
Add the local corporate inhabitant tax and enterprise tax on top of national corporate tax, and the combined, effective rate a profitable small company actually pays typically lands somewhere in the neighborhood of 25% to 35%, depending on your income level and where you're incorporated — local tax rates vary by prefecture and municipality. There's no single correct number to quote here; it depends on your specific numbers.
One part of this bundle doesn't care whether you made a profit. The per-capita portion of the corporate inhabitant tax, shown in the table above, is charged every year regardless of your results, based on your capital and employee headcount rather than your income. A company that loses money in its first year, or every year, still receives this bill.
As with consumption tax, the filing deadline follows your fiscal year-end: corporate tax returns and payment are due within two months of it. A one-month filing extension can be elected in some cases, but payment itself is still due at the two-month mark regardless, with interest charged on the gap if you use the extension.
None of this is meant to make Japan's corporate tax sound more intimidating than it is — for a small, newly established company, the actual bill is often modest. But “what's the rate” isn't really a single-number question, and the ¥70,000 minimum in particular catches founders who assumed a loss-making year meant a zero tax bill. If you'd like help estimating your first year's numbers, feel free to reach out to us.
This article is for general informational purposes only and does not constitute tax advice for any specific situation. Rules and relief measures described here are subject to change through future tax reform. If you're setting up a business in Japan, feel free to reach out to us about your particular circumstances.